FTAs: How the EU is approaching the fight against corruption

Among trade commissioner Cecilia Malmström’s pledges in her 2015 ‘Trade for All’ strategy there is stepping up the fight against corruption. This promise is gradually being translated into action with new anti-corruption provisions foreseen in the coming updated EU Mexico Global Agreement and recently launched EU Chile Association Agreement upgrade.

Corruption is a multifaceted and complex phenomenon than can mostly be tackled at the domestic level of a country. “We cannot very fundamentally affect it as external agents, from outside”, said Alina Mungiu-Pippidi, a professor at the Hertie School of Governance in Berlin. Nonetheless, it can be a contribution, explains Mungiu Pippidi, citing in particular public procurement as a good area to tackle the problem.

The World Trade Organization’s Government Procurement Agreement, of which only a subset of WTO members are parties, is seen as one effective tool to increase competition and transparency in public tendering markets, hence reducing corruption.

The 2013 Trade Facilitation Agreement signed in Bali is also conceived as a means to reduce corruption at customs – a major concern for firms trading internationally.

The EU’s trade agreements add to the WTO’s baseline on procurements and customs through dedicated chapters which reinforce transparency provisions and electronic handling of public tenders and customs paperwork, for example. Recent EU trade agreements also include general transparency provisions in domestic regulation, namely for services.

The chapter on investment protection in CETA, the trade agreement with Canada, stipulates that foreign investors that have paid bribes to obtain contracts will be excluded from the protection offered by the investment court foreseen in the treaty.

Anti-corruption has long been a key tenet of United States trade policy. The Transpacific Partnership – of which it ultimately pulled out – contains a dedicated anti-corruption chapter. The US had also tabled proposals on anti-corruption to the EU during the now-frozen TTIP negotiations. So in a way, the EU is catching up.

The new EU approach to scaling up on the fight against corruption shaping up is measured and prudent. Talking at a workshop hosted by the European Parliament, Signe Ratso, DG Trade’s director for trade strategy and analysis, explained that the new chapter it tabled to Mexico in the ongoing talks basically includes an obligation to sign up to the 2003 United Nations convention against corruption.

The convention covers preventive measures, criminalisation of corruption, law enforcement, international cooperation, asset recovery, and technical assistance and information exchange. Issues the convention aims to tackle include bribery, trading in influence, abuse of functions, and various acts of corruption in the private sector.

The EU will also be asking its trading partners to sign up to measures and codes of conduct devised in the framework of the G20 and the FATF – Financial Action Task Force – to combat money laundering.

In the area of enforcement, the EU is planning to proceed the way it proceeds in the ‘trade and sustainable development’ chapters of its recent free trade agreements, in other words by taking a cooperative approach. The ‘domestic advisory groups’ formed to look at the implementation of labour and environmental standards protection will see their remit extended to cover corruption issues.

Disagreements between the signatory parties will be solved as in the labour and environment area. There will be political consultations first, and, if necessary the establishment of an expert panel to examine the case. Yet any finding of corruption would not lead to sanctions – such as the suspension of trade concessions granted in the FTA.

Whether the EU’s approach will be effective is as yet much too early to say.